By Kim Mackrael

OTTAWA--The Canadian economy contracted in October, falling short of expectations as manufacturers recorded their largest monthly decline in output in nearly three years.

Canada's gross domestic product, or the broadest measure of goods and services produced in an economy, fell 0.3% in October from the previous month, to 1.68 trillion Canadian dollars ($1.24 trillion), Statistics Canada said Friday. Market expectations were for a flat reading, according to economists at Royal Bank of Canada.

The decline was led by a sharp drop in manufacturing output, which fell 2.0%, marking its largest monthly decrease since December 2013. Statistics Canada said the drop reflected a lower volume of manufactured goods exports.

The October report comes after a stronger-than-expected reading in September, when Statistics Canada said the economy expanded a revised 0.4% from the previous month. The data agency had earlier estimated a 0.3% gain for September.

Write to Kim Mackrael at kim.mackrael@wsj.com

(END) Dow Jones Newswires

December 23, 2016 08:45 ET (13:45 GMT)

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